[G.R. No. 135813. October 25, 2001.

]
FERNANDO SANTOS, Petitioner, v. Spouses ARSENIO and NIEVES REYES, Respondents.
Facts:
In June 1986, Fernando Santos, Nieves Reyes and Melton Zabat orally agreed to form a
partnership a lending business. Santos contributed 70% (as financier) while Reyes and Zabat
shared 30% (as industrial partners). Later, Reyes introduced Cesar Gragera whom they would
provide loans to Grageras corporation particularly its employees. In return Gragera shall have a
commission based on the loan payments. The partners decided on August 1986 to have a written
agreement but they found out that Zabat engaged in a competitor venture thus expelled him. The
two had Arsenio Reyes (husband of Nieves) replaced Zabat.
However, Santos accused the Spouses of not remitting the loans payments. He argued that the
couple were only his employees and there was a special arrangement between him and Gragera.
The trial court and the Court of Appeals ruled against Santos.
Issue:
Whether or not there was a partnership formed between Santos and the Spouses Reyes?
Held:
YES. The original partnership with Zabat continued even after the expulsion of the latter from
the partnership because there was no intent to dissolve the (partnership) relationship.

[Respondents] were industrial partners of [petitioner]. . . . Nieves herself provided the

initiative in the lending activities with Monte Maria. In consonance with the agreement between
appellant, Nieves and Zabat (later replaced by Arsenio), [respondents] contributed industry to
the common fund with the intention of sharing in the profits of the partnership. [Respondents]
provided services without which the partnership would not have [had] the wherewithal to carry
on the purpose for which it was organized and as such [were] considered industrial partners
(Evangelista v. Abad Santos, 51 SCRA 416 [1973]).
While concededly, the partnership between [petitioner,] Nieves and Zabat was technically
dissolved by the expulsion of Zabat therefrom, the remaining partners simply continued the
business of the partnership without undergoing the procedure relative to dissolution. Instead,
they invited Arsenio to participate as a partner in their operations. There was therefore, no
intent to dissolve the earlier partnership. The partnership between [petitioner,] Nieves and
Arsenio simply took over and continued the business of the former partnership with Zabat, one
of the incidents of which was the lending operations with Monte Maria.

Heirs of Tan Eng Kee vs CA

Benguet Lumber has been around even before World War II but during the war, its stocks were
confiscated by the Japanese. After the war, the brothers Tan Eng Lay and Tan Eng Kee pooled
their resources in order to revive the business. In 1981, Tan Eng Lay caused the conversion of
Benguet Lumber into a corporation called Benguet Lumber and Hardware Company, with him
and his family as the incorporators. In 1983, Tan Eng Kee died. Thereafter, the heirs of Tan Eng
Kee demanded for an accounting and the liquidation of the partnership.
Tan Eng Lay denied that there was a partnership between him and his brother. He said that Tan
Eng Kee was merely an employee of Benguet Lumber. He showed evidence consisting of Tan
Eng Kees payroll; his SSS as an employee and Benguet Lumber being the employee. As a result
of the presentation of said evidence, the heirs of Tan Eng Kee filed a criminal case against Tan
Eng Lay for allegedly fabricating those evidence. Said criminal case was however dismissed for
lack of evidence.
ISSUE: Whether or not Tan Eng Kee is a partner.
HELD: No. There was no certificate of partnership between the brothers. The heirs were not
able to show what was the agreement between the brothers as to the sharing of profits. All they
presented were circumstantial evidence which in no way proved partnership.
It is obvious that there was no partnership whatsoever. Except for a firm name, there was no
firm account, no firm letterheads submitted as evidence, no certificate of partnership, no
agreement as to profits and losses, and no time fixed for the duration of the partnership. There
was even no attempt to submit an accounting corresponding to the period after the war until
Kees death in 1984. It had no business book, no written account nor any memorandum for that
matter and no license mentioning the existence of a partnership.
In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a sole proprietorship. He
registered the same as such in 1954; that Kee was just an employee based on the latters payroll
and SSS coverage, and other records indicating Tan Eng Lay as the proprietor.
Also, the business definitely amounted to more P3,000.00 hence if there was a partnership, it
should have been made in a public instrument.
But the business was started after the war (1945) prior to the publication of the New Civil Code
in 1950?
Even so, nothing prevented the parties from complying with this requirement.

Also, the Supreme Court emphasized that for 40 years, Tan Eng Kee never asked for an
accounting. The essence of a partnership is that the partners share in the profits and losses. Each
has the right to demand an accounting as long as the partnership exists. Even if it can be
speculated that a scenario wherein if excellent relations exist among the partners at the start of
the business and all the partners are more interested in seeing the firm grow rather than get
immediate returns, a deferment of sharing in the profits is perfectly plausible. But in the
situation in the case at bar, the deferment, if any, had gone on too long to be plausible. A person
is presumed to take ordinary care of his concerns. A demand for periodic accounting is evidence
of a partnership which Kee never did.
The Supreme Court also noted:
In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to each other are not
partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a partnership, whether such coowners or co-possessors do or do not share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the
persons sharing them have a joint or common right or interest in any property which the returns
are derived;
(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he
is a partner in the business, but no such inference shall be drawn if such profits were received in
payment:
(a) As a debt by installment or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of the business;
(e) As the consideration for the sale of a goodwill of a business or other property by installments
or otherwise.

Case Digest: Filomeno Negado, Narciso Rocha, and Juan Guirindola vs Gonzalo
Makabenta
54 OG 4082
28 February 1958
Facts:
Plaintiffs filed a suit against the defendant for the recovery of possession and management of
Liberty Theater located in Leyte and for an accounting of all money and property pertaining
thereto.
The plaintiffs allege that the theater is owned and operated by a partnership known as Hemarogui
Company composed of the plaintiffs and defendant. Conversely, the defendant alleges that he is
the sole and exclusive owner of the theater while the plaintiffs are merely creditor.
The trial court held that no partnership exists and the oral and material evidence (books,
accounts, and papers) presented by the plaintiffs are incompetent to establish existence of the
partnership.
Issue:
Whether or not a partnership exists among Negado, Rocha, Guirindola and Makabenta
Decision:
There exists a partnership. In determining whether or not a particular transaction constitutes
partnership, the intention as disclosed by the entire transaction, and as gathered from the facts
and from the language employed by the parties as well as their conduct. A partnership may be
created without any definite intention to create it, the intention of the parties being inferred from
their conduct and dealings with each other. For the purpose of showing the existence of a
partnership, books, papers, accounts and similar writings are admissible as evidence provided
that the party against whom they are offered is shown to have authorized or ratified them.
of 1